U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 18368 / September 26, 2003
SECURITIES AND EXCHANGE COMMISSION v. WARREN J. SOLOSKI, 1:03CV01993 (D.D.C. Sept. 25, 2003) (PLF)
SEC SUES ATTORNEY FOR INSIDER TRADING
On September 25, 2003, the Securities and Exchange Commission filed a settled civil action in the United States District Court for the District of Columbia, alleging that defendant Warren J. Soloski, a California attorney, traded on material nonpublic information that he obtained while representing Pay Pop, Inc. ("Pay Pop"), a now defunct British Columbia-based telecommunications company. The Complaint alleges that Soloski violated the antifraud provisions of the federal securities laws (Section 17(a) of the Securities Act of 1933 (the "Securities Act") and Section 10(b) of the Securities Exchange Act of 1934 (the "Exchange Act") and Rule 10b-5 thereunder). The Commission also issued an administrative order finding that Soloski violated the same provisions.
In both its federal court Complaint and its cease-and-desist order, the Commission charged that Soloski received a proposed term sheet from an investment banking firm for a potential $8 million equity financing of Pay Pop. On the same day Soloski received the draft term sheet, he purchased 10,000 shares of Pay Pop. The Commission further charged that Soloski sold these shares after learning the financing would not close due to the issuance of at least 15 million Pay Pop shares via stock certificates that were free of any restrictive legends in violation of Section 5 of the Securities Act.
According to the Commission, Soloski sold his Pay Pop stock while in possession of the following material nonpublic information that he obtained through his representation of the company: (i) Pay Pop had 19 million shares issued and outstanding, approximately 15 million of which Soloski knew to be illegally issued; and (ii) Pay Pop failed to close the $8 million financing despite the fact that Pay Pop had issued a false press release on June 28, 1999 stating that it had closed on the financing. As a result of Soloski's sale of Pay Pop stock, he avoided losses of $922.14.
Without admitting or denying the Commission's allegations and findings, Soloski has consented to the entry of a final judgment requiring him to pay disgorgement of $922.14, prejudgment interest of $288.83 thereon, and a one-time civil penalty of $922.14. In addition, Soloski has consented to the entry of an order requiring him to cease and desist from future violations of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5 thereunder. In the Matter of Warren J. Soloski, Admin. Proc. No.3-11275, Exchange Act Rel. No.34-48551 (September 26, 2003), Securities Act Release No. 34-48551.
Simultaneously with the filing of these actions, the Commission has also filed a civil injunctive action against five individuals, including a former senior manager of Pay Pop's transfer agent, CIBC Mellon Trust Company, for engaging in a fraudulent scheme to create purportedly "free trading" Pay Pop stock (i.e., legend-free stock certificates that created the false impression that the stock complied with U.S. registration requirements), issuing a series of materially false and misleading public statements and selling Pay Pop shares to unsuspecting investors. Securities and Exchange Commission v. Daryl Desjardins, et al., 1:03CV01992 (D.D.C. Sept. 25, 2003) (PLF); Litigation Release No. 18366. In addition, the Commission also filed a settled civil injunctive action against Sean Nevett, for engaging in an unregistered distribution of Pay Pop stock in violation of Section 5 of the Securities Act. Securities and Exchange Commission v. Sean Nevett, 1:03CV01994 (D.D.C. Sept. 25, 2003) (PLF); Litigation Release No. 18367.
The Commission acknowledges the assistance in its investigation by the Federal Bureau of Investigation, NASD Regulation, Inc., the District Attorney for San Diego County, California, the Organized Crime Agency of British Columbia, the Royal Canadian Mounted Police, the British Columbia Securities Commission, and the Ontario Securities Commission.
The Commission's investigation in this matter is continuing.